Germany digs in heels on Greek debt as Merkel resists write-off

Chris Papadopoullos was City A.M.'s economics reporter until February 2016.

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Chris Papadopoullos

GERMAN Chancellor Angela Merkel stuck to her guns yesterday, insisting there will not be a debt haircut for Greece.

“We said in July that maybe – no, not maybe – there is still leeway on the extension of maturities, on interest rates,” Merkel said in an interview on Germany’s ZDF television. “One can do more in certain ways. But it’s also clear that within the Eurozone there can be no haircut, no reduction in debt.”

But cutting the interest rate on Greece’s debt may not be enough to persuade the International Monetary Fund (IMF) to take part in a fresh bailout deal. Europe is not keen on a deal without the IMF.

On Friday, IMF chief Christine Lagarde said the new €85bn (£60bn) bailout, which received the backing of Eurozone finance minsters last week, would need “to provide significant debt relief, well beyond what has been considered so far.”

The IMF said it will get involved after the first review, expected in November, when debt is to be discussed.

The Eurozone is expected to foot the bill for the first €26bn slice of the loan which Greece could receive this week if it is approved by the necessary parliaments. Greek banks will be recapitalised with €10bn of the slice. Most of the rest will repay creditors.